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Factual background and the accident
On September 22, 2006, Sukhvinder Singh rented a vehicle from Wheels 4 Rent. The rental vehicle was insured under a motor vehicle liability policy issued by Zurich Insurance Company (“Zurich”). Chubb Insurance Company of Canada (“Chubb”) also issued a policy to Wheels 4 Rent, but that policy was for optional accidental death and dismemberment coverage, which Ms. Singh did not purchase. The following day, on September 23, 2006, Ms. Singh was involved in a single-vehicle accident while driving the rental car. She returned the vehicle on September 25, 2006 in damaged condition but did not report the accident to the rental company at that time. Wheels 4 Rent later discovered the damage and prepared a “records only” accident report for its adjuster, as it had no property damage coverage with Zurich for this loss and no knowledge of any injury to Ms. Singh. In the fall of 2006, Ms. Singh began experiencing back, shoulder and arm pain. Not knowing Zurich was the automobile insurer, she recalled seeing Chubb’s insurance materials at the Wheels 4 Rent location and retained a lawyer to pursue accident benefits.
Initial claim for benefits and Chubb’s denial
Ms. Singh’s lawyer contacted Wheels 4 Rent’s corporate office to obtain the insurance particulars. The rental company refused to disclose its insurance information on the basis that it had no accident report from Ms. Singh. On November 9, 2006, her lawyer submitted an application for accident benefits (an OCF-1) to Chubb. On November 21, 2006, Chubb denied the application, stating that the coverage was “not a personal automobile policy” and that Ontario Statutory Accident Benefits therefore did not apply. Chubb did not pay benefits, did not begin adjusting the claim, and did not investigate which insurer was actually responsible. More than a year and a half later, on May 28, 2008, Chubb finally advised Ms. Singh’s lawyer that Zurich was Wheels 4 Rent’s automobile insurer. Once Zurich became aware of the claim, it agreed to adjust it on a without-prejudice basis, pending a priority dispute with Chubb under the Insurance Act and O. Reg. 283/95. Zurich began paying statutory accident benefits to Ms. Singh in 2012.
The statutory and regulatory framework
Under s. 268(1) of the Insurance Act, every motor vehicle liability policy is deemed to provide statutory accident benefits under the Statutory Accident Benefits Schedule (“SABS”). Section 268(2) sets out the priority rules for determining which insurer is liable to pay benefits to an occupant of an automobile, generally looking first to the insurer of a vehicle in respect of which the person is an insured and then, if necessary, to the insurer of the vehicle they occupied, another involved vehicle, and finally the Motor Vehicle Accident Claims Fund. Section 268(3) requires an insurer against which a person has recourse to pay benefits, and s. 268(4) allows a person with recourse against more than one insurer to choose which insurer to claim against. The Disputes Between Insurers Regulation, O. Reg. 283/95, overlays this with a “pay now, dispute later” scheme. Section 1 directs that all disputes over which insurer must pay benefits under s. 268 are to be resolved under the Regulation. For pre-September 1, 2010 accidents like this one, s. 2(1) requires the first insurer to receive an application for statutory accident benefits to pay benefits to the insured person pending resolution of any coverage dispute. Section 3(1) then precludes an insurer from disputing its obligation to pay unless it gives written notice within 90 days of receiving a completed application to every insurer it claims is responsible. Section 3(2) permits late notice only if 90 days was insufficient to determine another insurer’s liability and the first insurer made reasonable investigations within that period. Disputes under the Regulation are resolved by arbitration, with appeal rights under the Arbitration Act, 1991.
First arbitration and appellate history on who is an “insurer”
Zurich and Chubb entered into an arbitration agreement that framed three issues: (1) whether Chubb was an “insurer” under s. 268 of the Insurance Act and O. Reg. 283/95; (2) if so, whether Chubb had complied with the Regulation; and (3) what amounts, if any, Chubb was responsible to indemnify Zurich. The first arbitrator, Stanley Tessis, held in March 2012 that Chubb was not an insurer under s. 268 and that there was no nexus between Chubb and Ms. Singh to trigger any obligation under s. 2 of the Regulation. On appeal, a Superior Court judge disagreed, finding a sufficient nexus because Ms. Singh rented from Wheels 4 Rent, Wheels 4 Rent was insured by Chubb for optional coverage, and Chubb’s optional policy was made available to her through the rental company. The judge held that Chubb was therefore an “insurer” for s. 2 purposes and required to pay and then dispute later. The Ontario Court of Appeal majority reversed, finding Chubb was not an insurer, but Justice Juriansz dissented, emphasizing that denying Chubb’s insurer status would undermine the Regulation’s policy of timely delivery of benefits regardless of disputes between insurers. The Supreme Court of Canada granted leave and allowed the appeal, adopting Juriansz J.A.’s dissent. The Supreme Court held that there was a sufficient nexus between Ms. Singh and Chubb, and that Chubb was an insurer for the purposes of s. 2 of the Regulation, obliging it, as the first insurer to receive an application, to pay benefits pending any priority dispute.
Ms. Singh’s catastrophic impairment and settlement
Following the Supreme Court’s 2015 decision, Chubb assumed the payment of Ms. Singh’s benefits from Zurich. By then, Ms. Singh had been determined to be catastrophically impaired. Chubb ultimately entered into a full settlement of Ms. Singh’s accident benefits claim. The dispute between the two insurers, however, remained unresolved: it now concerned whether Chubb had complied with its obligations as a s. 2 insurer and what reimbursement, if any, was owed between the companies.
Second arbitration on priority, breaches and quantum
With the first arbitrator deceased, the Superior Court appointed the Honourable J. Douglas Cunningham as the second arbitrator to decide the remaining issues under the arbitration agreement. Zurich sought reimbursement of approximately $998,386.99 in statutory accident benefits it had paid to Ms. Singh before Chubb took over, while Chubb claimed about $1,537,229.04 for amounts it had paid after the Supreme Court’s ruling. The second arbitrator framed his task as determining which insurer was liable to pay statutory accident benefits to Ms. Singh as the priority insurer and what consequences should flow from any breach of the Regulation. On the evidence, he found that Zurich had no notice of Ms. Singh’s claim until 2008 and that, had Chubb complied with its obligations as an “insurer” under ss. 2 and 3, it could easily have identified Zurich as the automobile insurer and given timely notice. Instead, Chubb ignored the application, failed to investigate, and never provided the required 90-day notice to Zurich. The arbitrator reviewed Ontario case law on breaches of ss. 2 and 3, including Kingsway and Lombard decisions, and concluded that there must be meaningful consequences for failing to comply with the “pay now, dispute later” regime. He emphasized that s. 2 is intended to prevent injured claimants from being left without prompt benefits because insurers are disputing who is on risk, and that s. 3 protects the true priority insurer’s ability to investigate and manage the claim early. Given Chubb’s inaction and breach of both provisions, he determined that Chubb should be permanently responsible for paying Ms. Singh’s accident benefits, even though Zurich was the priority insurer under s. 268. He ordered Chubb to reimburse Zurich approximately $998,3XX in benefits already paid (the reasons cite both $998,386.99 and $998,368.99, creating a minor internal discrepancy in the exact cents figure) and to pay Zurich’s costs of the arbitration.
Appeal to the Superior Court and reallocation of liability
Chubb appealed the second arbitrator’s award to the Superior Court. The appeal judge agreed with the arbitrator that Chubb had breached its obligations under ss. 2 and 3. He concluded that Chubb, as the first insurer to receive the OCF-1, was obliged to pay initially and then, having failed to conduct any meaningful investigation or give 90-day notice, became permanently liable to pay benefits to Ms. Singh. However, the judge took a different view of the consequences between the two insurers. He reasoned that, once Chubb’s breaches resulted in it being deemed an insurer for Ms. Singh, it effectively entered the statutory priority hierarchy alongside Zurich under s. 268(2). On that view, Zurich’s status as the priority automobile liability insurer could not simply be extinguished by Chubb’s misconduct. The appeal judge therefore treated Zurich and Chubb as insurers of equal priority for Ms. Singh’s claim. He held that the second arbitrator’s sanction—placing the entire accident benefits burden on Chubb—was unreasonable, and instead ordered that Zurich and Chubb share responsibility by each paying half of Ms. Singh’s benefits, with adjustments through 2% compound interest under s. 46 of the SABS to reflect relative delays in handling the claim. He viewed that interest mechanism as an appropriate sanction for each insurer’s lapse, rather than permanent full responsibility on Chubb alone.
Issues on further appeal and standard of review
Zurich, but not Chubb, obtained leave to appeal to the Ontario Court of Appeal. Zurich argued that the appeal judge erred in law in: (1) his interpretation of the relationship between ss. 2 and 3 of the Regulation and s. 268 of the Insurance Act; (2) his use of SABS 2% compound interest as the primary sanction for Chubb’s breaches; and (3) deciding issues beyond the scope of the arbitration agreement. Because there is a statutory right of appeal from arbitration awards under the Arbitration Act, the Court of Appeal applied the usual appellate standards from Vavilov and Housen. Questions of law were reviewed for correctness, and questions of mixed fact and law for palpable and overriding error (or reasonableness, depending on how the parties’ pre-Vavilov agreement was characterized, though nothing turned on that distinction). The Court owed no deference to the appeal judge on pure questions of law.
Court of Appeal’s analysis of the “pay now, dispute later” scheme
The Court of Appeal began by reviewing the legislative context. It reiterated that s. 2 of the Regulation is “critically important” to the timely delivery of benefits and embodies the principle that the first insurer to receive an application must “pay now and dispute later” so that injured persons are not left without benefits while insurers argue over coverage. Section 3’s 90-day notice rule, with its limited extension mechanism in s. 3(2), was recognized as a strict provision designed to bring clarity and certainty to inter-insurer disputes and to protect the true priority insurer’s ability to investigate early. The Court surveyed prior appellate authorities (Kingsway #1, Kingsway #2, Wawanesa and Lombard) and distilled a three-part framework for cases where the first insurer is not the priority insurer under s. 268 but receives the claim and potentially breaches ss. 2 and 3: first, determine whether there is still a live issue about who is the priority insurer; second, if the first-receiving insurer is not the priority insurer, determine whether it breached ss. 2 and/or 3 (including whether there was a sufficient nexus and whether any extension of the 90-day period is warranted); and third, if such breaches are found, exercise remedial discretion to decide whether that insurer should nevertheless be required to pay benefits permanently, considering the effects of the breaches. The Court acknowledged that there is a strong policy case for an inflexible rule that an insurer who fails both to pay and to give notice should always be held permanently responsible for the claimant’s benefits, but held that it was bound by earlier appellate decisions that treated this as a discretionary, fact-dependent question rather than an automatic consequence.
Errors in treating Zurich and Chubb as equal priority insurers
Applying that framework, the Court held that the appeal judge had committed legal errors. First, he was wrong to state that breach of s. 3 automatically makes the first insurer permanently liable to pay benefits; the case law preserves arbitrators’ discretion in fashioning an appropriate remedy. Secondly, and more critically, the appeal judge erred by treating Chubb and Zurich as insurers of equal priority under s. 268 once Chubb’s breaches made it permanently liable to Ms. Singh. Section 268(2) sets out a closed list of priority insurers and does not contemplate inserting a new insurer into that hierarchy merely because it violated ss. 2 and 3. The Regulation and common law instead govern the consequences of such breaches. The fact that Zurich would have been the priority insurer absent Chubb’s misconduct did not legally restrict the remedy that could be imposed on Chubb under the Regulation. Nor did the Supreme Court’s earlier determination that Chubb was an “insurer” for the purposes of s. 2 of the Regulation transform Chubb into an insurer of equal priority with Zurich under s. 268(2). On that basis, there was no statutory or jurisprudential foundation for the appeal judge’s approach of forcing Zurich and Chubb to share benefits and using 2% SABS interest as the main sanction.
Restoring the arbitrator’s permanent liability finding
The Court of Appeal then examined whether the second arbitrator’s decision to place permanent liability on Chubb was legally sound and reasonable on the facts. It concluded that the arbitrator had correctly identified the applicable legal principles from Kingsway and Lombard, explicitly recognized that permanent payment is not an automatic result of a s. 3 breach, and turned his mind to what sanction best accorded with the purposes of ss. 2 and 3 in this specific case. Factually, when Chubb received Ms. Singh’s OCF-1, it simply denied coverage, took no investigative steps to determine who the proper insurer was, gave no 90-day notice to Zurich, and waited more than 18 months before disclosing Zurich’s role. That conduct left Ms. Singh without benefits at a time when she most needed support, and it impaired Zurich’s ability to promptly investigate and manage the claim. Those are precisely the harms ss. 2 and 3 are designed to prevent. Against that background, and in light of authorities like Lombard that had upheld making the breaching insurer permanently responsible in analogous circumstances, the Court held that the arbitrator’s choice of remedy was reasonable and within his discretion. There was therefore no basis to interfere with the award.
Final disposition, successful party and monetary outcome
The Ontario Court of Appeal allowed Zurich’s appeal and reinstated the second arbitrator’s award in full. That outcome confirms that Chubb is permanently responsible for paying Ms. Singh’s accident benefits and must reimburse Zurich for the benefits Zurich paid before Chubb took over—approximately $998,3XX (cited in the reasons both as $998,386.99 and $998,368.99, so the precise cents figure is internally inconsistent)—together with Zurich’s costs of the arbitration (which are not quantified in this judgment). In addition, as the successful party in the appeal, Zurich is awarded $25,000 in all-inclusive costs by the Court of Appeal. Because the reasons do not specify the exact arbitration cost figure and contain a small discrepancy in the reimbursement amount’s cents, the precise overall dollar total in favour of Zurich cannot be definitively calculated from this decision alone, but it consists of approximately $998,000 in reimbursed benefits, plus unquantified arbitration costs, and $25,000 in appeal costs.
Appellant
Respondent
Court
Court of Appeal for OntarioCase Number
COA-25-CV-0088Practice Area
Insurance lawAmount
$ 25,000Winner
AppellantTrial Start Date